Tuesday, July 26, 2011

Are the ‘assessed value’ and market value related?

In short, the answer to this question is “no”.

Disclaimer: this answer applies to metro Phoenix, Arizona in the year 2011, where I work as a full-time Realtor. If you’re reading this long after publication or from another location, please consult a professional in your area. In other words, I am a Realtor but I am not your Realtor… yet. Wanna hire me to be YOUR Realtor? Click here.

Lots of buyers want to use the Maricopa County Tax Assessor’s “Assessed Value” to justify why they should be able to buy a particular house for less than the listing price.  This is especially common among folks who are engineers, attorneys or other Type-A’s.

Listen up, Type-A’s! I feel your pain. I understand your need to get your hands on hard data, statistics, charts, graphs, etc.  Thing is, the market value of houses has to do with 1 thing, and only 1 thing: what are other buyers currently paying for other, similar homes?

Here’s a very brief comps analysis on a particular HUD home currently listed for sale in North Phoenix. To begin, this is the tax assessor’s notice of valuation on the home. For tax year 2011 the assessed value is $147,500:

Capture, tax assessor valuation on 1727 E Blackhawk (click to enlarge image)

This home has 2,425 square feet built in 1995 with a pool in the backyard, and the lot backs up to mountain preserve. The home is currently listed for sale at $240,000.

Whoa, tax assessor says only $147,500. What gives?!?  Here’s the comps on 4 sales within the past 60 days of the same size and similar condition homes in the subdivision:

Capture, CMA on 1727 E blackhawk (click to enlarge image)

Notice that all 4 of these homes were on the market for less than 40 days before finding a buyer – the market’s moving pretty fast. One home has yet to close, and it’s included as a possible indication of where prices are headed. Look at the column titled “SP” for “selling price”. Comps on this home range from $235,000 to $276,500.

In other words, other buyers have very recently paid between $235,000 and $276,500 for very similar homes in similar condition, located very close by. Therefore, the market value on this home is somewhere in the mid-$200,000s. If you make an offer of $147,500 you will be wasting your time.

Don’t fall into the trap of looking at the assessed tax valuation when trying to judge how much a house is “worth”. It’s worth what buyers are willing to pay for it. Get yourself a competent Realtor (hey, I know what of those… wait, I am one of those; hire me!)

Thanks for reading; come back soon!